U.S. service economy grows more than expected as ISM index rises to 55

Service industries expanded in November at its fastest pace in six months, showing the U.S. recovery is expanding throughout the year comes to an end.

The index of the Institute for Supply Management non-manufacturing, which covers about 90 percent of the economy, rose to 55 last month from 54.3 in October. A reading above 50 signals growth.

Target Corp. is one of the largest retailers and sales during the holiday shopping season, testament to the earnings of the costs needed to encourage U.S. companies to increase hiring. A report from the Labor Department today showed the economy generates fewer jobs than expected last month while the unemployment rate rose to its highest level since April.

"The economy is improving," said Jeffrey Roach, chief economist at Horizon Investments in Charlotte, North Carolina. "It's a slow recovery. The consumer is beginning to happen, begin to show renewed confidence in recovery."

The median forecast of 76 economists surveyed by us expected the ISM index would rise to 54.8. Estimates ranged from 52.3 to 59.4.

Shares trim losses and Treasuries rose after the report. 500 of Standard & Poor's fell 0.2 percent to 1,219.27 at 10:39 am in New York. The yield on the benchmark 10-year Treasury, which moves inversely to its price, fell to 2.96 percent from 2.99 percent late yesterday.

November Employment

Employers added 39,000 workers to their payrolls in November, less than the most pessimistic forecast of economists surveyed by us, the Labor Department figures showed today. The unemployment rate rose to 9.8 percent from 9.6 percent. In October 2009, unemployment rose to a maximum of 26 years of 10.1 percent.

The ISM non-manufacturing employment increased to 52.7, the highest since October 2007, from 50.9 the previous month. The measure of new orders rose to 57.7, the highest since April, from 56.7. Business activity fell to 57 from 58.4.

The ISM's prices paid index fell to 63.2 from 68.3 the previous month.

The survey covers the services industries ranging from utilities and traders to health care, housing, finance and transport. The group index of the factory, published on 1 December fell to 56.6 last month from 56.9 in October.

The services index averaged 56.1 in the five years to December 2007, when the last recession. Is an average of 51.6 since the current recovery began in June 2009 through October, behind the 55.2 reading for the ISM manufacturing index over the same period.

Consumer spending

The recovery from the worst recession since the 1930s has been led by manufacturing exports have increased, business investment picked up and inventories are replenished. While the housing industry remains a weak link, consumer spending, which accounts for 70 percent of the economy has been growing.

The Federal Reserve, in its latest survey of regional economies, said on 01 December the economy was strong in much of the U.S. the hiring of the improvement, expansion of manufacturing and retailers anticipated a holiday shopping season stronger. The survey covered the period from early October to mid November.

Sales Target, Limited Brands Inc. and Costco Wholesale Corp. rose more than analysts estimated in November as more consumer goods to insurance broke off, especially during the weekend of Thanksgiving.

Estimated sales for Thanksgiving and three days after U.S. holidays reached $ 45 billion, a gain of 9.1 percent from a year ago, as the number of buyers increased by 8.7 percent to $ 212 million, according to the National Retail Federation.

November Sales

"November sales were better than expected, driven by strong customer traffic during the month," said Gregg Steinhafel, Target's executive director, yesterday in a statement.

At the same time, construction is one of the industries that have weighed on the non-manufacturing ISM survey and stay home sales near historic lows. new homes sold at an annual rate of 283,000 in October, near its lowest point of all time and below a recent peak of 1.39 million in July 2005.

"Sales of new homes are extremely low," said Larry W. Seay, chief financial officer of Meritage Homes Corp., in a teleconference on 11 November. "The reason sales are so low due to fear" that potential buyers "could lose their jobs."

As part of an effort to reach some of the largest employers in the nation, President Barack Obama met with Wal-Mart Stores Inc., CEO, Mike Duke at the White House on 29 November. The meeting is part of a series of meetings to seek the views of businesses, aimed to spur recovery and adding jobs.